Familienunternehmen in Westdeutschland. Corporate Governance und Gesellschafterkultur seit den 1960er Jahren (Family business in West Germany since the 1960s)
|Publication:||Vol. 21, Schriftenreihe zur Zeitschrift fuer Unternehmensgeschichte. Munich: C. H. Beck Verlag, 2010|
From small start-ups to global corporations, family-owned businesses were the main pillar of West Germany's economic growth after World War II. They continue to shape the corporate landscape to this day. This book offers a path-breaking historical analysis of the peculiarities of their corporate governance, placing them within the wider context of the economic and social history of Germany. Based on both quantitative data and archivally based case studies, this book explores how the relationship between the family and the firm changed in different industries over time. These changes did not—as often assumed—result in the decline of family businesses but instead gave rise to a different kind of competitive and internationally oriented "Mittelstand." The study integrates approaches from new institutional economics, cultural anthropology, and family sociology in order to understand this critical turning point in German family business history. The book analyzes changes in ownership and management, dynastic, and succession strategies, as well as the "psychology of ownership," with detailed case studies of large family businesses. The book offers a compelling explanation for the strong ownership concentration seen in German business and reveals the malleable relationship between family and business. It provides rich empirical evidence that offers a new interpretation of family-influenced businesses as a dynamic force embedded in the economic, institutional, and cultural setting of Germany.
Publisher's Link: http://www.chbeck.de/productview.aspx?product=795301&toc=3264
Investor Behaviour in a Nascent Capital Market: Scottish Bank Shareholders in the Nineteenth Century
|Authors:||Graeme Acheson and John D. Turner|
|Publication:||Economic History Review (forthcoming)|
This article uses the records of nineteenth-century Scottish banks in an attempt to understand investor behaviour in the early British capital market. It presents four main findings, some of which do not conform to the basic assumptions of standard asset pricing theories. First, in an era when efficient portfolio diversification was not possible, the intrinsic risk of an equity security was an important input into investor decision making. Second, our evidence suggests that businesspeople initially regarded bank stock as a consumption good, as being a stockholder gave them privileged access to bank finance. When bank lending practices changed in the middle of the century, this access-to-credit advantage associated with owning bank stock largely disappeared. Third, investors typically exhibited a bias towards banks that conducted business in the areas where they resided. Fourth, a sizeable proportion of investors were stockholders in more than one bank.
Protecting Outside Investors in a Laissez-faire Legal Environment: Corporate Governance and Dividends in Victorian Britain
|Authors:||Gareth Campbell and John D. Turner|
|Publication:||Economic History Review (forthcoming)|
Companies in Victorian Britain operated in a laissez-faire legal environment from the perspective of outside investors, implying that such investors were not protected by the legal system. This article seeks to identify the alternative mechanisms that outside shareholders used to protect themselves by examining the dividend policy and governance of over 800 publicly traded companies at the beginning of the 1880s. We assess the importance of these mechanisms by estimating their impact on Tobin's Q. Our evidence suggests that dividends and well-structured and incentivized boards of directors may have played a role in protecting the interests of outside investors.
Technology Diffusion and Postwar Growth
|Authors:||Diego Comin and Bart Hobijn|
|Publication:||NBER Macroeconomics Annual (forthcoming)|
In the aftermath of World War II, the world's economies exhibited very different rates of economic recovery. We provide evidence that those countries that caught up the most with the U.S. in the postwar period are those that saw an acceleration in the speed of adopting new technologies. This acceleration is correlated with the incidence of U.S. economic aid and technical assistance in the same period. We interpret this as supportive of the interpretation that technology transfers from the U.S. to Western European countries and Japan were an important factor in driving growth in these recipient countries during the postwar decades.
Download the paper: http://www.hbs.edu/research/pdf/11-027.pdf
|Authors:||Thomas R. Eisenmann, Geoffrey Parker, and Marshall Van Alstyne|
|Publication:||Strategic Management Journal (forthcoming)|
Due to network effects and switching costs in platform markets, entrants generally must offer revolutionary functionality. We explore a second entry path that does not rely upon Schumpeterian innovation: platform envelopment. Through envelopment, a provider in one platform market can enter another platform market, combining its own functionality with the target's in a multi-platform bundle that leverages shared user relationships. We build upon the traditional view of bundling for economies of scope and price discrimination and extend this view to include the strategic management of a firm's user network. Envelopers capture share by foreclosing an incumbent's access to users; in doing so, they harness the network effects that previously had protected the incumbent. We present a typology of envelopment attacks based on whether platform pairs are complements, weak substitutes, or functionally unrelated, and we analyze conditions under which these attack types are likely to succeed.
Download the paper: http://www.hbs.edu/research/pdf/07-104.pdf
Competition for Scarce Resources
|Authors:||Péter Esö, Volker Nocke, and Lucy White|
|Publication:||The RAND Journal of Economics 41, no. 3 (fall 2010)|
We model a downstream industry where firms compete to buy capacity in an upstream market that allocates capacity efficiently. Although downstream firms have symmetric production technologies, we show that industry structure is symmetric only if capacity is sufficiently scarce. Otherwise it is asymmetric, with one large, "fat," capacity-hoarding firm and a fringe of smaller, "lean," capacity-constrained firms. As demand varies, the industry switches between symmetric and asymmetric phases, generating predictions for firm size and costs across the business cycle. Surprisingly, increasing available capacity can cause a reduction in output and consumer surplus by resulting in such a switch.
Implications for GAAP from an Analysis of Positive Research in Accounting
|Authors:||S.P. Kothari, Karthik Ramanna, and Douglas J. Skinner|
|Publication:||Journal of Accounting & Economics (forthcoming)|
Based on extant literature, we review the positive theory of GAAP. The theory predicts that GAAP's principal focus is on control (performance measurement and stewardship) and that verifiability and conservatism are critical features of a GAAP shaped by market forces. We recognize the advantage of using fair values in circumstances where these are based on observable prices in liquid secondary markets but caution against expanding fair values to financial reporting more generally. We conclude that rather than converging U.S. GAAP with IFRS, competition between the FASB and the IASB would allow GAAP to better respond to market forces.
Download the paper: http://intranet.hbs.edu/dept/drfd/papers/0809/09-137.pdf
Vertical Merger, Collusion, and Disruptive Buyers
|Authors:||Volker Nocke and Lucy White|
|Publication:||International Journal of Industrial Organization 28, no. 4 (2010)|
In a repeated game setting of a vertically related industry, we study the collusive effects of vertical mergers. We show that any vertical merger facilitates upstream collusion, no matter how large (in terms of capacity or size of product portfolio) the integrated downstream buyer. But a vertical merger with a larger buyer helps more to facilitate upstream collusion than a similar merger with a smaller buyer. This formalizes the idea expressed in the U.S. and EU Non-Horizontal Merger Guidelines that some downstream buyers may be more "disruptive" of collusive schemes than others.
Wealth Inequality in the European Periphery, Ireland, 1858-2001
|Author:||John D Turner|
|Publication:||Oxford Economic Papers 62, no. 4 (October 2010)|
Using annual will indexes, a series of wealth concentration is constructed for the north of Ireland on a decennial basis for the period 1858 to 2001. Wealth was highly concentrated at the beginning of the sample period, but inequality falls towards the end of the nineteenth century and continues to fall until the 1970s. However, there does not appear to be a Kuznets-type process at work. Instead, using data on socio-occupational status, it is suggested that the fall in wealth concentration appears to be associated with the demise of the titled classes. Interestingly, similar to the findings of other studies, wealth has become more concentrated since the 1970s.
Basel Needs a Firm Hand and Fewer Delays
|Authors:||David Scharfstein and Jeremy Stein|
|Publication:||Financial Times, September 13, 2010. (Editorial)|
An abstract is unavailable at this time.
Download the paper: http://people.hbs.edu/dscharfstein/Articles/FT-Article_09-14-10.pdf
The Profits of Power: Commercial Realpolitik in Europe and Eurasia
An abstract is unavailable at this time.
Download the paper: http://www.hbs.edu/research/pdf/11-028.pdf
When Does a Platform Create Value by Limiting Choice?
|Authors:||Ramon Casadesus-Masanell and Hanna Halaburda|
We present a theory for why it might be rational for a platform to limit the number of applications available on it. Our model is based on the observation that even if users prefer application variety, applications often also exhibit direct network effects. When there are direct network effects, users prefer to consume the same applications to benefit from consumption complementarities. We show that the combination of preference for variety and consumption complementarities gives rise to (1) a commons problem (users have an incentive to consume more applications than the social optimum to better satisfy their preference for variety); (2) an equilibrium selection problem (consumption complementarities often lead to multiple equilibria); and (3) a coordination problem (lacking perfect foresight, it is unlikely that users will end up buying the same set of applications). The analysis shows that the platform can resolve these problems by limiting the number of applications available. By limiting choice, the platform may create new equilibria (including the socially efficient allocation), destroy Pareto-dominated equilibria, and reduce the severity of the coordination problem faced by users.
Download the paper: http://www.hbs.edu/research/pdf/11-030.pdf
The Intensive Margin of Technology Adoption
|Authors:||Diego Comin and Martí Mestieri|
We present a tractable model for analyzing the relationship between economic growth and the intensive and extensive margins of technology adoption. The "extensive" margin refers to the timing of a country's adoption of a new technology; the "intensive" margin refers to how many units are adopted (for a given size economy). At the aggregate level, our model is isomorphic to a neoclassical growth model, while at the microeconomic level it features adoption of firms at the extensive and the intensive margin. Based on a data set of 15 technologies and 166 countries our estimations of the model yield four main findings: (1) there are large cross-country differences in the intensive margin of adoption; (2) differences in the intensive margin vary substantially across technologies; (3) the cross-country dispersion of adoption lags has declined over time, while the cross-country dispersion in the intensive margin has not; and (4) the cross-country variation in the intensive margin of adoption accounts for more than 40% of the variation in income per capita.
Download the paper: http://www.hbs.edu/research/pdf/11-026.pdf
Medium Term Business Cycles in Developing Countries
|Authors:||Diego Comin, Norman Loayza, Farooq Pasha, and Luis Serven|
We build a two-country asymmetric DSGE model with two features: (1) endogenous and slow diffusion of technologies from the developed to the developing country and (2) adjustment costs to investment flows. We calibrate the model to match Mexico-U.S. trade and FDI flows. The model is able to explain the following stylized facts: (1) U.S. and Mexican output co-move more than consumption, (2) U.S. shocks have a larger effect on Mexico than in the U.S., (3) U.S. business cycles lead over medium-term fluctuations in Mexico, and (4) Mexican consumption is more volatile than output.
Download the paper: http://www.hbs.edu/research/pdf/10-029.pdf
Does Mandatory IFRS Adoption Improve the Information Environment?
|Authors:||Joanne Horton, George Serafeim, and Ioanna Serafeim|
We examine the effect of mandatory International Financial Reporting Standards (IFRS) adoption on firms' information environment. We find that after mandatory IFRS adoption, consensus forecast errors decrease for firms that mandatorily adopt IFRS relative to forecast errors of other firms. We also find decreasing forecast errors for voluntary adopters, but this effect is smaller and not robust. Moreover, we show that the magnitude of the forecast errors decrease is associated with the firm-specific differences between local GAAP and IFRS. Exploiting individual analyst level data and isolating settings where investors would benefit more from either increased comparability or higher quality information, we document that the improvement in the information environment is driven both by information and comparability effects. These results are robust to variations in the measurement of information environment quality, forecast horizon, sample composition, and tests of earnings management.
Download the paper: http://www.hbs.edu/research/pdf/11-029.pdf
Crashes, Collateral, and the Financing of Securities
|Authors:||Jakub W. Jurek and Erik Stafford|
This paper develops a parsimonious static model for characterizing financing terms in collateralized borrowing markets. We characterize the systematic risk exposures for a variety of securities and develop a simple indifference-pricing framework to value the systematic crash risk exposure of the collateral. We then apply Modigliani and Miller's (1958) Proposition Two (MM) to split the cost of bearing this risk between the investor and the intermediary broker, resulting in a schedule of haircuts and financing rates. The model produces comparative statics and time-series dynamics that are consistent with the empirical features of repo market data, including the credit crisis of 2007-2008.
Download the paper: http://www.hbs.edu/research/pdf/11-025.pdf
A Positive Approach to Studying Diversity in Organizations
|Authors:||Lakshmi Ramarajan and David Thomas|
In this article, we distinguish between positive findings in diversity research and a positive approach to studying diversity. First, we review and integrate research on diversity from organizational behavior, social psychology, and sociology from 1998 to 2010 that has already documented positive findings in relation to diversity. We discuss this research using two broad categories: (1) What is positively affected by diversity (positive for what)? This category consists of research that has shown instances of intergroup equality, positive intergroup relations, and the high performance of diverse groups. (2) When is diversity positive (positive when)? This category describes organizational and individual-level conditions under which intergroup outcomes, relations, and group performance are positive. Second, we discuss a positive approach to studying diversity and describe some examples of organizational scholarship that have taken such an approach. We also discuss some of the limitations of taking a positive approach to diversity and propose some ways that diversity scholars interested in taking a positive approach can overcome these limitations. By illuminating both positive findings in diversity research and a positive approach to studying diversity, we hope to spark more research that examines the beneficial and empowering aspects of difference for individuals and groups in organizations.
Download the paper: http://www.hbs.edu/research/pdf/11-024.pdf
Using What We Know: Turning Organizational Knowledge into Team Performance
|Authors:||Bradley R. Staats, Melissa A. Valentine, and Amy C. Edmondson|
This paper examines when and how project teams' use of knowledge previously codified and stored in the organization affects team performance. We draw upon the team effectiveness, knowledge management, and information systems literatures to develop five hypotheses on the effects of team knowledge use on two measures of team performance (quality and efficiency), based on structural characteristics of the task and team. We also distinguish between a team's mean use of stored knowledge and the concentration of knowledge use in a team. Using objective data from several hundred software development projects in an Indian software services firm, we find that mean team knowledge use has a positive effect on project efficiency but not on project quality. Team concentration of use is also associated with project efficiency but, in contrast to mean use, is related to lower project quality. As predicted, we also find that mean team use is more positively related to performance when teams are dispersed geographically, have less human capital, or are faced with particularly complex tasks. Our findings offer insight for theory and practice into how accessing stored organizational knowledge can improve knowledge workers' productivity and help build organizational capability.
Download the paper: http://www.hbs.edu/research/pdf/11-031.pdf
Cases & Course Materials
A&M/Octone Records: All Rights or Nothing?
Anita Elberse, Elie Ofek, and Caren Kelleher
Harvard Business School Case 511-031
In April 2008, after successfully transitioning Octone Records to Universal Music Group and relaunching the label as A&M/Octone Records, president and CEO James Diener is facing a new challenge. Diener and his executive team have trouble convincing a new, promising act, Paper Tongues, to join A&M/Octone on a so-called all-rights deal, which specified that the label would receive a percentage of all of the artist's revenue streams, including recorded music, concert/ticket sales, merchandising, commercial licensing, sponsorships, and endorsements. Negotiations have stalled. Should A&M/Octone hold on to its "all-rights or no deal" stance? Or was it time to switch to a recorded-music-only deal? Designed for use alongside "Octone Records," HBS No. 507-082, the case allows for an in-depth examination of new-product development and talent management strategies in the context of the music industry. The case provides rich insights into how contracts between labels and artists are structured and how advances in technology are impacting the music industry and its players.
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Lena G. Goldberg and Chad M. Carr
Harvard Business School Case 311-021
Six vignettes drawn from decided cases explore legal and business issues in hiring, firing, promoting, and demoting employees, with an emphasis on protected classes, pretext, and anti-discrimination laws in the setting of start-ups and privately held companies.
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The Fox Islands Wind Project
Joseph B. Lassiter, James Corcoran, Max Gazor, Dylan Hogarty, and Alexander H. Somers, Jr.
Harvard Business School Case 810-129
The market for electricity on the Fox Islands of North Haven and Vinalhaven, Maine is unique and costly for residents. Historically, electricity prices on the islands had been three times the national average because of the high cost of importing electricity via an underwater cable and maintaining the distribution network on the islands. George Baker, a professor at Harvard Business School, decided to lower the energy costs of the island's residents with wind power.
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Controlling Hot Money
Robert C. Pozen
Harvard Business School Case 311-022
The manager of the Japan Equities Fund is faced with an increase in "hot money" moving quickly in and out of the Fund. This short-term trading is an attempt to take advantage of the difference between the closing times of the Tokyo and New York Stock Exchanges. The CFO of the fund manager considers the various strategies available to limit such short-term trading, which will be presented soon to the Fund's board of directors.
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Lakshmi Ramarajan, Christopher Marquis, and Bobbi Thomason
Harvard Business School Case 411-030
Public Architecture is a non-profit architecture company dedicated to creating social and professional change through design for the public good. Public has focused on three strategies to create change: 1) promoting the design community's commitment to pro bono work, 2) inspiring action through creating design with a social mission, and 3) disseminating knowledge created by socially relevant design throughout the profession. As a central actor and change agent in the profession, Public Architecture created The 1% Program, a national network of architecture and design firms that have publicly pledged to donate 1% of their billable hours to the public good. However, the organization has been struggling to keep both The 1% Program and its own design initiatives integrated and reinforcing each other in creating social and professional change. Should Public split into two organizations? Would keeping the diverse elements within Public Architecture together force the entire organization to the least common denominator or would it provide them with a flexible platform for creating social change? These questions have important implications for Public's growth strategy, their funding, and resource allocation decisions.
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